UK Manufacturers To Be Under Pressure To Price Competitively: IHS Global Insight

5/11/2012 9:45 AM ET

The persisting weakness in the British economy is likely to exert pressure on manufacturers to price competitively to sustain their businesses, IHS Global Insight chief European and UK economist Howard Archer said in a note Friday.

Data released by the Office For National Statistics today showed that British producer price inflation slowed to a 28-month low of 3.3 percent in April. However, prices increased 0.7 percent month-on-month, with a 0.6 percent gain in core output prices.

The economist assessed that the strong sequential growth in prices - which according to the statistical office was influenced by a 0.3 percent contribution from newly-added duty changes- is likely to to reinforce the Bank of England's concerns that consumer price inflation will not slow as quickly as previously expected.

Meanwhile, input prices dropped 1.5 percent month-on-month in April as oil prices retreated significantly from their March highs. According to the economist, the decline in input prices eases the pressure on manufacturers' margins and reduces pressure on them to raise prices.

IHS Global Insight observed that the uncertainty as to whether or not the Bank of England will do more quantitative easing will depend on whether or not the economy shows signs of picking up and future inflationary developments.

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